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Shrinking meat and dairy product manufacturing weighs on growth outlook

Monday 10th December 2018

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New Zealand manufacturing sales fell for a second straight quarter on shrinking volumes of meat and dairy products, tempering expectations for next week's reading of the wider economy. 

The volume of manufacturing sales fell a seasonally adjusted 1.6 percent in the three months ended Sept. 30, led by a 6.7 percent decline in meat and dairy product manufacturing, Statistics New Zealand said.

“Most meat and dairy products in New Zealand are exported and occasionally, the timing of exports, price changes, and exchange rates can affect manufacturing sales,” manufacturing statistics manager Sue Chapman said.

It was the second consecutive fall in manufacturing sales volumes and follows the 1.7 percent fall in the June 2018 quarter.

The manufacturing survey is the final tranche of second-tier data economists use to firm up their forecasts for third-quarter gross domestic product. GDP expanded 1 percent in the June quarter, accelerating from a 0.5 percent rise in March. The central bank is tipping growth of 0.7 percent in the September quarter.  

ANZ Bank New Zealand had been tipping a small quarterly rebound in manufacturing sales volumes. Given that didn't eventuate, chief economist Sharon Zollner said "it does represent a downside risk" to ANZ's forecast for a 0.6 percent expansion in the GDP. 

Sales volumes for seven of the 13 industries fell in the September 2018 quarter. The largest decreases were in meat and dairy products while transport equipment, machinery and equipment fell 2.5 percent. Stats NZ said the only notable increase came from the chemical, polymer, and rubber products industry, up 7 percent.

“The increase in the chemicals industry rebounded on a fall in the June quarter, when an unscheduled outage at the processing plant restricted methanol production,” said Chapman.

The value of manufacturing sales rose 2 percent, versus a 1.8 percent increase in June.  The chemical, polymer, and rubber products industry recorded its largest value rise in the series, up 9.4 percent. The value component of manufacturing sales also captures price movements. 

Unadjusted sales values rose 7.1 percent to $26.9 billion in the quarter from the same period a year earlier, while the volume of sales eased 0.3 percent after lifting 1.7 percent in the prior quarter. 

(BusinessDesk)

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